GE (NYSE: GE) to Proceed with Synchrony Financial IPO

IPO, GE, Finance, Company, ValueThe strategy of Jeff Immelt, the Chief Executive of General Electric Co (NYSE: GE) to better the industrial earnings of his company while reducing its financial operation is yielding the desired fruit. On July 18, 2014, the company posted a 13 percent increase in its profits and about a 3 percent increase in its sales. The strong numbers are due to healthy earnings from its oil equipment, gas equipment and jet engine businesses.

Away from finance

General Electric also began the split off of the company’s business of consumer finance in North America through an IPO. The consumer finance arm of the company is valued at approximately $20 billion.

The IPO triggers General Electric’s decisive move to trim the business of giants like GE Capital. This is being done as its Chief Executive wants the company to move away from financial earnings. Immelt expects to minimize profit sharing from GE capital to a restricted 25 percent of the total earnings of the company within 2016. GE Capital contributes to about 40 percent of the group’s total revenues currently.

Working towards the aim, Immelt is dropping off the financial assets of the company and at the same time striving to increase growth and minimize costs related to its central industrial businesses. These include locomotives and power turbines. General Electric’s move to take control of energy related assets of Alstom SA, a French company for about $17 billion in recent months further strengthened its industrial standing. Immelt has directly announced the management’s decision to reshape General Electric.

Synchrony Capital

GE has also started to market Synchrony Financial, the new name for its consumer finance arm, to investors. It wants to collect approximately $3.1 billion by hiving off a 15 percent stake. The newly named company provides a number of financial products, including store affiliated credit cards and retail financing. The cards can be availed at JC Penney (NYSE: JCP), Wal-Mart (NYSE: WMT) and Lowe’s (NYSE: LOW).

Synchrony Financial has set the price of each share in the range of $23 and $26. The total number of shares is 125 million and it is the aim of the company to list itself by the end of the month. This IPO is thought to be the largest debut by an American company in 2014. This tops $2.6 billion All Financial offering in the first part of 2014. GE’s continued stake in the business after the IPO will be valued approximately $17 billion.

Leave a Comment